June 8, 2010

New Protections for Homeowners and Bank of America to Pay $108 Million

Nearly two years ago Bank of America acquired Countrywide. Those in the know believe that this was B of A's business plan for obtaining the very lucrative home loan servicing business assets of Countrywide. It may be time for B of A to start paying for those business assets by settling up with the homeowners bilked by Countrywide.

Yesterday the Federal Trade Commission (FTC) announced that B of A will pay $108 Million in settlement of federal charges that Countrywide over billed struggling homeowner-borrowers. This settlement covers only about 200,000 borrowers with regard to the $108 Million - a drop in the bucket according to many. See the full FTC Announcement, especially if you are a homeowner experiencing financial difficulty, foreclosure and/or bankruptcy.

In addition to paying the $108 Million, the settlement order prohibits Countrywide (now B of A) from taking advantage of borrowers who have fallen behind on their payments. This order will cover millions of mortgage loans, including tens of thousands of loans involving borrowers in bankruptcy and/or foreclosure. According to the FTC, with regard to the servicing of loans, there is a permanent bar against the following:
  • Making false or unsubstantiated representations about loan accounts, such as amounts owed.
  • Charging any fee for a service unless it is authorized by the loan instruments, by law, or by the consumer for a specific service requested by the consumer.
  • Charging any fee for a default-related service unless it is a reasonable fee charged by a third party for work actually performed. If the service is provided by an affiliate of a defendant, the fee must be within limits set by state law, investor guidelines, and market rates. Defendants must obtain annual, independent market reviews of their affiliates’ fees to ensure that they are not excessive.
Bank of American admitted no wrongdoing in connection with the settlement.  It remains to be seen whether anyone will have enough staying power to discover what B of A knew about the business of Countrywide before the acquisition in July 2008. Countywide's portfolio exceeded $1.4 Trillion according to the FTC. One would think that B of A's due diligence would have revealed this particular problem and perhaps many more. If so, Bank of America should not be heard to complain about paying $108 Million nearly two years later.

The California Homeowners Institute believes this settlement may be just the beginning for Bank of America in connection with its desire to become a major player in the home loan servicing business.

No comments: